The insurance business in India isn’t just growing, but also becoming more sophisticated in terms of product offerings. To help readers keep ahead of developments in this business,Mint features a Q&A on insurance every Monday.
I purchased an endowment policy two years ago. I had to undergo a medical test at the time but I didn't disclose that I was a chain smoker. I had also stated that my parents were in good health, though my mother has high blood pressure and had suffered a mild heart attack. If any claims arise, can the company reject the claim saying I withheld information?
All life insurance companies follow the principle of utmost good faith, that is, the insured must disclose all the medical facts required for a policy issuance. In case the insured hides a fact that is material to the assumption of risk by the insurers and it comes to light at a later date, the insurance company may cancel the policy or reject the claim. Disclosing medical facts may change your premium amount but may not make you ineligible for life insurance. So it is advisable to disclose your current health status and family medical history with complete honesty to avoid problems in future.
I am 39 and earn Rs35,000 per month. I have five endowment policies with a combined sum assured of Rs5.6 lakh, with an annual premium of Rs32,000. Are the existing policies enough to cover my insurance requirement?
The concept of human life value (HLV) can help decide how much life cover one should opt for. The HLV of a person at your age should be around 10 times the annual income. The sum assured should basically be equal to an amount which, if invested, should fetch a regular income for the dependants so that they are able to maintain a lifestyle they are used to. So, assuming that you have no liabilities, you need Rs42 lakh of cover. The plans taken by you are endowment (essentially oriented towards savings). I would recommend that you take a pure term policy that will cost you around Rs15,000 a year and will give you a cover of close to Rs35 lakh for 20 years.
Readers are welcome to write in with their queries to firstname.lastname@example.org. The questions will be answered by senior executives from leading insurance firms.
This week’s expert is Rajesh Relan, managing director, MetLife